International Trade Committee on May 13th, 2014

[Dr. Ailish Campbell]

First of all, I think it's ambitious and I like that. I like the fact that we have to get more aggressive about emerging market opportunities. I think that anything we can do on building relationships more broadly with Congress in the United States is important. Parliament and Congress relationships are incredibly beneficial; all party relationships and deepening relationships at the governor level, the state level, are also essential. I commend the chair of this committee and others for their work with the U.S. and with the states in the U.S. and with their political contacts of all political stripes. I'd like to know a little more about the consular service in the U.S. before I comment on it.

I've taken a look at the departmental plans—I can't get all the acronyms right—the departmental plans and priorities and reports to Parliament. You know the acronyms better than I do. We have some macro numbers but, for example, I don't have the head count numbers to let you know whether the footprint has changed and what impact that has had.

I can also tell you that as we move into emerging markets, two things are important, I think. First of all, local knowledge and business acumen in those markets are going to be critical. We need to leverage business associations and the Canadian diaspora communities that know these markets well, to develop plans to succeed in those markets.

Second, I talked about head count but more and more we should be applying our digital tools effectively. We should be using the DFATD website. It can be difficult to navigate. I'd suggest that might be improved in the first instance to allow more effective communication with firms of all sizes. Some of these things don't necessarily need more money, but they need us to be more focused and more effective, and to have the right individuals with the right talents in place to operationalize the GMAP.

[Ron Cannan, Conservative, Kelowna—Lake Country, BC]

Thanks.

You talked about diversification and broadening trade, and I couldn't agree with you more on the philosophy that a rising tide lifts all boats, both from emerging markets and from Canadian companies. One of our government's goals is to ensure that Canadian companies have the support to succeed abroad. We've heard from other witnesses that only 18% of Canadian businesses and SMEs are exporting, so we're trying to encourage more export opportunities.

Do you think using economic diplomacy as a key driver will help encourage opportunities for Canadian businesses to succeed abroad?

[Dr. Ailish Campbell]

I think another member of this committee said that it's a practical way of doing business; it's a pragmatic policy. I would have to say that I find the supposition that we would have a firewall between our political and economic diplomatic resources to be unsophisticated and ultimately would not deliver on Canadian interests.

I also think the idea that firms don't care about human rights in the countries that they operate in is also startlingly naive. Firms believe in human rights, because not only is it the right thing to do, but they are also obliged to by domestic and international laws. They have employees that are also fully embedded in those communities as business leaders. Those who run operations in emerging markets live in the very markets in which they are operating, so they care as citizens if not participatory members of society. I think the naive division between political and economic policy is no longer realistic, if it ever was.

Having spent 10 years in the public service, and it was my great honour, at one point, to be a public servant in the Department of Foreign Affairs, I don't know a single Canadian ambassador who didn't understand both his or her political mandate as well as the economic interest that he or she may have the opportunity to deliver on.

I don't think there's a single Canadian firm that would question, for example, that there's such a thing as a national interest and a Canadian public interest, and that certain values we all hold as Canadians are above and beyond and far more important than the interests of any one firm. There isn't a single CEO in our organization that would question that principle and that would not endorse, for example, the Canadian diplomatic community’s acting on important human rights issues as well as the basic and important developmental needs that my esteemed fellow witness has pointed out, for example, in sanitation, maternal health, or education. These are not mutually exclusive goals, and I reject wholeheartedly the thought that our diplomatic assets, our ambassadors, are not sophisticated enough to understand at what point they have to act on these various interests.

[The Chair, Conservative, Rob Merrifield]

Your time has gone, and I don't think you can do justice to your question or the answer in 10 seconds.

[Ron Cannan, Conservative, Kelowna—Lake Country, BC]

I want to thank Dr. Campbell for that succinct answer and also for her service. I know she worked for Industry Canada and is a great asset to Canada and will continue to do great work.

Thank you.

[The Chair, Conservative, Rob Merrifield]

Thank you very much.

Madam Liu, go ahead.

[Laurin Liu, NDP, Rivière-des-Mille-Îles, QC]

Thank you to our witnesses for their articulate testimony. Both of you also testified during our study on Honduras and Canada. Concerning the previous point on human rights, I think it's true that no company goes into a country wanting to necessarily violate human rights, but in a country like Honduras where there's no strong judicial system, I think there are problems in Canada’s signing trade deals with these types of countries.

Mr. Heidrich, I'd like to go back to a question that my colleague asked Ms. Campbell and give you a crack at it, concerning the line found in the GMAP, “to modernize existing FTAs to maximize the benefits to Canadian workers, exporters, businesses and investors.”

In your view, Mr. Heidrich, do you believe that there is enough evidence to show a causal link between FTAs and wealth creation and productivity gain or employment?

[Pablo Heidrich]

No, there is no causal relationship between signing FTAs or even bilateral investment treaties and getting increases in your country's productivity or competitiveness or number of jobs or average real wages. It depends on what you do with the rest of your policy toolbox.

If you have the ability and the know-how to have effective policies to supplement an FTA or a BIT, then you might get those results. I think FTAs and BITs are instruments of policy that provide opportunities for those things to happen, but they are not sufficient elements or sufficient conditions for that to happen.

For example, you mentioned the case of Honduras. I very much disagree that Honduras will have the public policy capacity to benefit in a substantial manner.

What happens is, if you sign an FTA between country A and B, and A has a very capable toolbox of policy-makers and so on, it may benefit very much from the FTA, and country B may not because it doesn't have them. But FTA is sort of the easy part, or the BIT is sort of the easy part of it.

[Laurin Liu, NDP, Rivière-des-Mille-Îles, QC]

Thanks.

I also read with a lot of interest your article, “Trade Policy of Trading Places”, which came out on December 19. In the article you mentioned, “If Canada wants a more balanced and sustainable path of growth through exports, it should be concentrating on promoting struggling—yet important—sectors...”. Then you go on to list a few sectors such as pulp and paper, auto parts, and telecommunications technology.

Could you expand on why this is important and the ways in which Canada could encourage these sectors?

[Pablo Heidrich]

One of the reasons Canadian exports overall have not increased as much as those of other countries is that our basket of tradable goods has changed substantially in the last 14 or 15 years. We have become much more an exporter of natural resources, and much less an exporter of manufactured goods. That has to do with increasing investments and expansion of the oil sands, and also the mining industry and potash. It also has to do with the overall increase in the value of the Canadian dollar, and the heightened level of competition from other countries, particularly from China, but also from other east Asian countries, and also from some Latin American countries, which are direct competitors with Canada inter-market. That has reduced Canadian exports of manufactured goods in real terms.

[Laurin Liu, NDP, Rivière-des-Mille-Îles, QC]

You also mentioned in the same article that Canada's main exports sell themselves. Could you expand on that point?

[Pablo Heidrich]

Sorry, could you say that again?

[Laurin Liu, NDP, Rivière-des-Mille-Îles, QC]

You also mentioned in the same article that Canada's main exports, namely natural resources, sell themselves.

[Pablo Heidrich]

Exactly, yes. This point is that most of Canada's exports are natural resources, and natural resources for the most part do not need much of a trade promotion diplomacy. People buy oil because they need oil. Most countries in the world don't have tariffs on oil, or silver, or gold, or uranium, but they do have them on textiles, on technology goods, and on engineering services, which are things that Canada also exports and could export more of. That would change the Canadian economy and make it more sustainable and more equitable.

[Laurin Liu, NDP, Rivière-des-Mille-Îles, QC]

I just have a quick question for Ms. Campbell, if—

[The Chair, Conservative, Rob Merrifield]

Sorry, your time has gone. You have four seconds and I know you can't do a question and answer in four seconds.

Mr. Shory, you have the floor, sir.

[Devinder Shory, Conservative, Calgary Northeast, AB]

Thank you to the witnesses.

Ms. Campbell, I hear you loud and clear, and to an extent I agree with you when you talk about the importance and strength of having a stable and strong relationship with the United States, and also focusing on diversifying our trade relations to other emerging markets quickly as well. In my view, no matter how diversified we become, the United States will still remain our largest trading partner. Being in the vicinity it's very important to have a good relationship with our neighbour as far as trade is concerned.

I also was looking at the Canadian Chamber of Commerce's recent report that you mentioned, “Turning it Around: How to Restore Canada’s Trade Success”. I was reading the introduction which talked about barriers and how Canada needs to take measures to improve its productivity and transportation infrastructure, and how Canada also needs to open new markets with free trade agreements. My colleague, Mr. Cannan, mentioned our ambitious pro-trade agenda where we already have negotiated or concluded agreements with 38 new markets, so that answers that question.

The report also has many recommendations for improvements under four themes. I was attracted by the fourth theme, which talks about incorporating the private sector into Canada's international development strategies. By the way, on that issue, I was just reading that this morning, Minister Fast , when speaking to the Canadian Chamber of Commerce, has named the advisory panel to help update global commerce strategies.

Also, in the past I've been in consultation with stakeholders, including the private sector, which has been very active in my view.

I want to read from one of the press releases by your organization this past November:

By identifying economic diplomacy as a key to advancing Canadian commercial interests, the federal government is ensuring Canadian companies have the support to succeed abroad.

Why is economic diplomacy so important for Canadian businesses? How do businesses put it to good use? Of course, I imagine that it goes part of the way in creating opportunities for businesses. What should businesses, the private sector, be doing to take advantage of the opportunities created by the global market action plan? Again, the Government of Canada is signing and concluding agreements—

[The Chair, Conservative, Rob Merrifield]

You've gone three minutes on a question. I'll give you two minutes on an answer.

[Devinder Shory, Conservative, Calgary Northeast, AB]

I have only five?

[The Chair, Conservative, Rob Merrifield]

Yes.

[Dr. Ailish Campbell]

I would say that the economic diplomacy theme requires the business strategies of our Canadian firms, of all sizes, to be oriented towards growth markets.

I know members of this committee travel widely in Canada in your constituencies and through your committee work. I would urge you to have one simple question that you ask all firms that you meet, which is, “What is your plan to go into new markets?” A supplementary question might be, “What are the tools that the government needs to help you with that plan?” If the business doesn't have a plan, that's a management failure. But if it does have a plan then, in Canada today, the financial tools of our incredibly solid banking system are there.

We're already an incredibly open market, and I'd like to see it become more so. I'd ask them, for example, do they have the talent they need? Is there a specific talent that they need to partner with local educational institutions to develop? Do they need to find that talent and either connect to it digitally, bring it in on a temporary basis, or partner with it to build a facility in another market?

Basically, we have been impressing upon our firms—and, in fact, they're market leaders—to have a strategy for Asia. More specifically, does China figure in their plans, given that it's a market of a billion people? And India, for example, because it's such a large growth market...but this is a country that's been rated, perhaps, as ranking 120 out of 150 countries as the most difficult place to do business. It doesn't benefit from the same, I would say, rule of law, lack of corruption, and more straightforward ways of doing business that Canada does. In that sense, our diplomatic assets are essential to help Canadian firms navigate the complexity of these markets, particularly the bureaucratic elements of importing and exporting to these markets.

Thank you.

[The Chair, Conservative, Rob Merrifield]

Very good.

I want to thank the witnesses for coming forward. You're always well briefed and very informative to the committee when you come. Accept our thanks on behalf of the committee.

With that, we'll suspend as we set up our next panel.

[The Chair, Conservative, Rob Merrifield]

We'll call the meeting back to order.

We have our second panel with us.

We have in the room with us, from the Aerospace Industries Association of Canada, Mr. Quick, president and CEO.

By video conference we have Duncan Cameron from Quebec. I would just say to you, Mr. Cameron, I apologize for having to cancel last Thursday's meeting. I understand you drove down from Quebec City. I hope the drive was good, but I do apologize on behalf of the committee for not being able to facilitate you at that time.

Just to check, is our sound coming through okay?

[Dr. Duncan Cameron, As an Individual]

Very fine, thank you.

[The Chair, Conservative, Rob Merrifield]

Okay, you can hear us, and we can hear you, so we will proceed.

We'll start with Mr. Quick. The floor is yours.